Using a Team Approach to Real Estate Investing

Real estate investing can be an excellent way to show growth over a period of time. Most people see the purchase of their own home as the largest and most profitable investment of their life time. The fact of living in the purchased home, of course, can only enhance the investment, because any mortgage payments paid, not only add to the equity in the home, but they also replace rent that they would have to be otherwise paid.

Investing in real estate with a view to reselling at a profit or finding rental income is a different matter. For this, some knowledge of the real estate market is required, and considerable skill is needed to make sound judgments and correct decisions about purchases, rentals, and sales. Most people would be ill-advised to act alone in real-estate investment. Instead, they should use a team approach, taking advice from the many professionals available in this field.

Licensed real estate agents tend to be experts in the area where they operate. Through their own experience, they are aware of local conditions and amenities, and they are in a good position to offer advice on realistic prices for both buying and selling. It is possible to negotiate a better price by dealing directly with the vendor, but a competent real-estate agent can usually point out hidden factors that might affect the sale. It is almost always better to consult an agent before making any offer to purchase.

Investors are constantly seeking ways to cut down on expenses, and this is understandable. Sometimes, however, what seems to be a saving, costs more over the long term. Lawyers' fees, for example, should be considered a necessary expense when purchasing a property. This is especially important when the property is purchased as a rental investment, as legal advice may be required on such things as leases, owner access, and evictions. An experienced accountant should also be consulted. Tax laws can be quite complicated and ambiguous, and a professional who is familiar with them can save the investor time and money.

Many investors in the real-estate market purchase older properties for renovation and eventual resale. This can be an excellent investment if proper precautions are taken. A professional appraiser can advise on the current value of the property before any decision to purchase is made, and he should also be able to estimate its future value when renovations are complete. A licensed inspector will point out what repairs must be done to meet minimum standards. Both of these professionals will cost money, but their services should be considered essential to any serious real-estate investor.

Investors who require financing for the purchase of a rental property need to select a mortgage broker or banker with experience in the field. A corporate loan may be possible when the purchase is for investment, or special rates may be available. Also, decisions sometimes have to be made quickly, and the investor may need access to funds with very short notice. Real-estate mortgage professionals are aware of this, and they will make every effort to make sure the transaction goes smoothly.

Finally, a successful investor will make sure that the investment is well covered. It is essential that the property itself be insured for its full value, and proper coverage for damage, fire, and liability must be included. If the property is mortgaged, the mortgage itself should also be insured. Only a careless investor tries to save money by declining insurance, but money can be saved by using the same insurer for more than one property, thus obtaining the best rates and discounts available.

Information is for educational and informational purposes only and is not be interpreted as financial or legal advice. This does not represent a recommendation to buy, sell, or hold any security. Please consult your financial advisor.